If the Average Return on Common Stocks Was 13

question 36

Multiple Choice

If the average return on common stocks was 13.3%, the average Treasury bill rate was 3.8%, and the average inflation rate was 3.2% what would be the expected nominal and approximate real market return for common stocks if the Treasury bill rate is expected to be 5.5% and the inflation rate is 4.1%?

• A) 9.5%, 13.6%.
• B) 13.6%, 9.5%.
• C) 15.90%, 10.9%.
• D) 14.6%, 9.1%.

Recognize the rationale and challenges associated with using fiscal and monetary policy to stabilize the economy.

Identify the goals of the Federal Reserve and the tools it uses to achieve those goals.

Analyze the implications of budget deficits and fiscal policy choices on the economy.

Understand the time lags associated with the effects of monetary and fiscal policy actions on aggregate demand.

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Definitions:

Bankruptcy

Legal nonpayment of financial obligations.

Operations Period

The timeframe during which specific operational activities or processes are carried out.

Financial Risk

The possibility of losing money on an investment or business operation, including risks related to market movements, credit, liquidity, and operational failures.

Actual Return

The real gain or loss experienced on an investment over a specified time period.